Britain’s exit from the European Union would be a “fatal mistake” Ken Clarke warned today.

In a broadside at his Eurosceptic Tory colleagues, the Cabinet heavyweight said staying at the heart of Europe was in the “national interest.”

Mr Clarke mounted his passionate defence of the EU at a joint event with Labour’s Lord Mandelson and the Lib Dem Chief Secretary to the Treasury Danny Alexander.

The fightback came after David Cameron pledged last week to renegotiate the EU treaty and then put it to a referendum if re-elected in 2015.

Mr Clarke said it was time to put the case for British membership “more strongly and more coherently.”

“There is a huge potential prize out there for the United Kingdom if only we focus our attention and influence in any future negotiations on the positive things that really matter.

"We need to concentrate on what we are in favour of and not just what we are against.

“It is in our vital national interest that we avoid the fatal mistake that would be a ‘no’ vote if a referendum is held in the next few years,” he said at the launch of the Centre for British Influence campaign.

Lord Mandelson accused opponents of putting out “lies and false propaganda”, and called for an end to the “mindless, inward looking, soul-searching and navel-gazing” over Britain’s place in the EU.

Mr Alexander said it was “nonsensical” to suggest Britain could pick and choose which parts of the EU it wished to take part in.

“We cannot afford to give the impression that we are going to disengage.

"The idea that we should extract ourselves from the bulk of EU obligations is nonsensical,” he said.

In a blow to Mr Cameron Germany issued a stark warning that Britain could “cherrypick” which parts of the EU it wanted to sign up to.

German Chancellor Angela Merkel has said she is willing to talk about the terms of British membership.

But her foreign minister Guido Westerwelle warned EU rules must “apply equally to all member states.”

“Saying ‘you either do what I want or I’ll leave!’ is not an attitude that works,” he said in an article for The Times.